How a repayment mortgage is calculated
A repayment mortgage charges interest on the balance outstanding each month, so the monthly payment is fixed but the split between interest and capital shifts steadily over the term.
What this calculator does
- Works out the monthly payment on a repayment mortgage from price, deposit, rate and term.
- Shows the loan amount and the loan-to-value that results from your deposit.
- Totals the interest payable across the full term.
- Assumes one interest rate for the whole term, which is not how UK mortgages are actually sold.
How the calculation works
The monthly payment comes from the standard amortising loan formula. Interest is charged each month on whatever capital is still outstanding, and the payment is set at the level that clears the balance exactly at the end of the term. Because the balance falls every month, the interest portion of each payment falls and the capital portion rises, which is why progress feels slow at first and accelerates later. Two things dominate the total interest: the rate and the term. Extending a term reduces the monthly payment but increases total interest substantially, because the balance stays high for longer. The loan itself is simply the price less your deposit, and the ratio between them is the loan-to-value that determines which rate tier a lender will offer you in the first place.
The rule
Monthly payment = L × r ÷ (1 − (1 + r)^−n), where L is the loan, r is the monthly interest rate and n is the number of monthly payments.
Step by step
- Subtract the deposit from the purchase price to give the loan amount.
- Divide the annual interest rate by twelve to get a monthly rate.
- Multiply the term in years by twelve to get the number of payments.
- Apply the amortising payment formula to find the fixed monthly payment.
- Multiply the payment by the number of months and subtract the loan to give total interest.
Worked example
A couple buy a £320,000 house with a £64,000 deposit on a 25-year repayment mortgage at 4.5%.
What was entered
| Property purchase price | £320,000 |
|---|---|
| Deposit amount | £64,000 |
| Annual interest rate | 4.5% |
| Mortgage term | 25 years |
| Mortgage repayment type | Repayment |
The arithmetic
- The loan is £320,000 − £64,000 = £256,000.
- A £64,000 deposit on a £320,000 property is 20%, so the loan-to-value is 80%.
- At 4.5% over 300 monthly payments the amortising formula gives £1,422.93 a month.
- Across the full term the payments total £426,879.34, of which £170,879.34 is interest.
- Interest exceeds two thirds of the original loan, which is what a quarter-century of borrowing costs at this rate.
What the calculator returns
| Loan amount | £256,000.00 |
|---|---|
| Monthly payment | £1,422.93 |
| Total interest over the term | £170,879.34 |
Key assumptions
- One interest rate applies for the whole term.
- Payments are made monthly, on time, and are never varied.
- Interest is calculated monthly on the outstanding balance.
Limitations
- UK mortgages are almost never fixed for the full term. You will typically remortgage every two to five years onto a different rate, so the total interest figure is an illustration of one scenario rather than a forecast.
- Product fees, valuation fees, legal costs and any early repayment charges are excluded.
- Stamp duty, insurance and ground rent are not included in the monthly figure.
- Interest-only mortgages behave completely differently: the balance never falls, so no capital is repaid.
Common questions
Why does a longer term cost so much more overall?
Will my payment really stay the same?
Why is so much of my early payment interest?
Related calculators
- Mortgage Affordability Calculator — Work out how much a lender would actually be willing to advance you.
- Mortgage Amortisation Calculator — See how the interest and capital split changes across the term.
- Mortgage Overpayment Calculator — See what overpaying would do to the term and the total interest.
- Loan-to-Value (LTV) Calculator — Loan-to-value decides which rate tier you can access.
Official sources
Every figure in this guide was checked against the sources below. Where a source could not confirm a figure, it is marked as requiring verification rather than presented as settled.
- Mortgages: how they work — MoneyHelperRepayment versus interest-only mortgage structures
- MCOB 11.6: Responsible lending, and responsible financing of home purchase plans — Financial Conduct AuthorityMCOB 11.6.18R: lenders must consider likely interest rates over at least five years and must assume a rise of at least 1% over that period, unless the rate is fixed for five years or more